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Use a three-way reconciliation at one shared cutoff date: compare the adjusted bank balance, the trust account’s general ledger or check register, and the combined balance of every client or matter ledger plus any administrative ledger. Those three amounts should agree. If they do not, trace the difference through the underlying records; do not add a plug entry to force a match.
The method applies broadly to U.S. pooled IOLTA and client trust accounts, but state rules govern reconciliation frequency, records, reporting, and retention. For example, Iowa’s court guidance requires monthly reconciliation, while Washington provides a monthly reconciliation and review report. These examples do not establish a nationwide schedule. Check the rules and trust-account resources for the state where you are licensed and the account is maintained.
What a three-way IOLTA reconciliation compares
Three figures must be calculated as of the same date:
- Adjusted bank balance: the statement’s ending balance, adjusted for deposits recorded by the cutoff but not yet credited and checks or other disbursements recorded by the cutoff but not yet debited.
- Trust account book balance: the balance in the trust account’s general ledger or check register as of that cutoff.
- Individual ledger total: the sum of all client or matter balances, plus the administrative ledger if one is used for non-client activity.
The three amounts should match. Arizona Bar guidance describes this three-way test and includes the administrative ledger; Iowa Judicial Branch guidance describes the same essential comparison and monthly subaccount trial balances. A bank-to-register reconciliation alone is incomplete because it does not establish that the books’ total is supported by the individual client records. Arizona Bar trust-account guidance; Iowa Judicial Branch trust-account guidance.
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How to reconcile the account step by step
1. Fix the cutoff date and gather records
Use the month-end or other cutoff required by your jurisdiction. Obtain the complete bank statement and transaction detail, the check register or general ledger, every client or matter ledger, the administrative ledger, and supporting deposit and disbursement records. Run all internal reports for the same date. A statement prepared after month-end may omit transactions already recorded in the books, and checks may take time to clear. Arizona Bar trust-account manual.
2. Reconcile the bank statement to the register
Start with the statement’s ending balance. Add deposits entered in the books by the cutoff that the bank had not yet credited. Subtract checks and other disbursements entered by the cutoff that the bank had not yet presented or debited. Compare the adjusted balance with the register or general ledger balance for the same date.
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For each outstanding item, verify the amount, date, and supporting record. Then inspect unexplained differences against statement lines, deposit records, canceled checks or debit details, and other source documents. Look for stale outstanding items, bank fees, interest, omitted or duplicated entries, incorrect dates, and data-entry mistakes. A statement by itself may not show enough detail to establish a deposit’s source or a payment’s payee, so retain the supporting records.
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3. Reconcile the general ledger to individual ledgers
Add the balance of every client or matter ledger as of the same cutoff, including the administrative ledger if the account uses one. Compare the resulting total with the trust account general ledger. Check whether a register transaction was assigned to the wrong client, a subledger entry is missing or duplicated, a debit or credit sign was reversed, or a balance was carried forward incorrectly. Ensure the total includes every ledger, not just matters with recent activity. Arizona Bar trust-account guidance.
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4. Record supported corrections and repeat the test
Correct only what the bank record and transaction documentation support. For each correction, record the date, client or matter where applicable, amount, reason, and source document. Preserve the original history and audit trail rather than erasing entries or posting a balancing amount with no documented basis. Then rerun the bank reconciliation and client-ledger total and confirm that all three figures agree.
5. Escalate a possible shortage or overdraft
A timing difference is not the same as a shortage. If a client ledger is negative, client liabilities exceed trust assets, the bank reports an overdraft or insufficient-funds check, or the records suggest an unauthorized or missing disbursement, preserve the records and promptly alert the responsible lawyer. Pause routine disbursements affected by the discrepancy while it is investigated, and follow the applicable state rules on response and reporting. Washington, for example, says overdrafts or checks presented against insufficient funds must be reported to disciplinary counsel with a full explanation under its framework; that is a Washington-specific obligation, not a national rule. Washington State Bar IOLTA guidance.
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Common reasons the figures do not match
| Pattern | What to check |
|---|---|
| Outstanding check or deposit | Confirm it was recorded by the cutoff, include it in the adjusted-bank calculation, and verify that it clears or is credited later. Arizona Bar trust-account manual. |
| Bank fee, wire charge, or interest | Match the statement entry to the bank record and post it to the proper ledger. Do not silently charge an account fee to a client balance; Arizona guidance calls for an administrative ledger for non-client activity. Arizona Bar trust-account guidance. |
| Register total differs from client-ledger total | Check for a transaction assigned to the wrong matter, a missing or duplicated subledger entry, a sign error, or an omitted client or administrative ledger. Arizona Bar trust-account guidance. |
| Duplicate or omitted transaction | Compare each relevant statement line with the register and supporting check, debit, or deposit record. Arizona Bar trust-account manual. |
| Reports use different dates | Rerun the bank, register, and client-ledger reports for one cutoff before treating the variance as an accounting error. Statement timing and check-clearing delays can create apparent differences. Arizona Bar trust-account manual. |
| Negative client balance or overdraft | Treat it as urgent, preserve relevant records, alert the responsible lawyer, and follow the reporting rules for the jurisdiction. Washington’s reporting framework is an example of a state-specific requirement. Washington State Bar IOLTA guidance. |
Handle bank fees and other non-client activity correctly
Keep non-client activity, such as bank fees and erroneous transactions, separate from client balances in an administrative ledger where required or appropriate. Arizona Bar guidance says fee-related deficits must be recorded and offset using personal funds to protect client and third-party funds. Never use one client’s money to cover another client’s shortage. Arizona Bar trust-account guidance.
Check your state’s reconciliation and record rules
There is no single schedule or retention period established for every U.S. lawyer by the sources cited here. Iowa’s Judicial Branch describes a rule requiring monthly reconciliation of the main trust ledger, subaccount ledgers, and adjusted bank statement, along with monthly subaccount trial balances. Washington’s Bar provides a monthly reconciliation and review report and refers lawyers to its professional-conduct rules and recordkeeping booklet. California’s State Bar lists state-specific trust-account rules and practical resources, with changes effective January 1, 2026. Consult the rules and official trust-account resources for your jurisdiction, and retain workpapers as those rules require. Iowa Judicial Branch trust-account guidance; Washington State Bar IOLTA guidance; California State Bar client trust-account guidelines.
If the cause remains unclear, seek help promptly from the responsible lawyer, your state bar’s trust-account or practice-management resources, or a qualified trust-accounting professional. Washington’s Bar describes consultation assistance for lawyers dealing with trust accounting. Washington State Bar IOLTA guidance.
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